Pension contributions affecting Tax Credits

Ian162

Hi,

I'm a Firefighter with a wife that is unemployed and two kids. I pay Occupational Pension Contributions directly from my pay before Tax and NI is deducted.

Before 2013, according to the guide, on the claim form I have had to deduct my pension contributions from my Gross pay for HMRC to work out my Child Tax Credit.
This year I filled the form out as I usually do without looking at the guide, and wouldn't you know it, they changed how its done.

My fault. Should have read the guide. I am now being investigated by HMRC. It was an innocent mistake and hopefully they'll recognise that.

But the guide now says (having read it) that all other pension types should be deducted except the Occupation Pension. This is more or less the exact opposite way of doing things from before.

Why has this changed?
Why is my pension type no longer deductible from my gross pay when it has been every other year I've claimed it?
HMRC have only just got round to checking my form, how on earth would they know how to calculate my Child Tax Credit if I dont remove my pension contributions for them?

I already receive less this year than last, despite a pay freeze and inflation. Which I perfectly understand, since the state of the country right now.
What I don't understand is how my Child Tax Credit apparently halves now from the previous year when I fill the form in correctly.

Sorry for so many questions.

Icequeen99

The wording may have changed but the rules have not. If it was deductible prior to 2013 it is deductible now.

Which form exactly are you referring to when you say the wording has changed?

If your employer takes the pension contributions before calculating tax and NI then you cannot deduct for tax credits - you never have been able to.

If you pay into a pension out of your net pay, then you can deduct it from your income for tax credits purposes.

IQ

zagfles

All pension contributions are deductible for the purposes of tax credits, whether to an occupational pension or a private one.

The confusion comes about from the definition of "gross pay". What do you mean by "gross pay" above? If it's the pay you get taxed on, ie the figure that's quoted on your P60, then your occupational pension contributions will already have been deducted from it, like you say above "I pay Occupational Pension Contributions directly from my pay before Tax and NI is deducted". So you don't deduct it again. You simply declare your P60 income.

For instance, if you earned £30,000 and paid £2000 to your workplace pension, your P60 will show £28,000 and that's what you declare. Your pension contributions are already deducted, you don't deduct them again.

AFAIK the guide has always said not to deduct occupation pension contributions. (which causes hassle for some people whose employers are awkward and deduct pension conts from net pay - shouldn't be allowed but some smaller employers do it that way).

Icequeen99

zagfles wrote: »

All pension contributions are deductible for the purposes of tax credits, whether to an occupational pension or a private one.

The confusion comes about from the definition of "gross pay". What do you mean by "gross pay" above? If it's the pay you get taxed on, ie the figure that's quoted on your P60, then your occupational pension contributions will already have been deducted from it, like you say above "I pay Occupational Pension Contributions directly from my pay before Tax and NI is deducted". So you don't deduct it again. You simply declare your P60 income.

For instance, if you earned £30,000 and paid £2000 to your workplace pension, your P60 will show £28,000 and that's what you declare. Your pension contributions are already deducted, you don't deduct them again.

AFAIK the guide has always said not to deduct occupation pension contributions. (which causes hassle for some people whose employers are awkward and deduct pension conts from net pay - shouldn't be allowed but some smaller employers do it that way).

Absolutely right. I should have been clearer that you can't deduct them because they have already been deducted.

IQ

Ian162

My Pension comes off before I pay tax, so I believe I pay into an occupation pension.
But my P60 indicates my total before any deductions and after all deductions, but not after pension deduction/before tax and NI.

It may be that this case is more unique and because of the figures on my P60 there has been confusion caused. I will contact HMRC and see if this is the problem.

zagfles

Ian162 wrote: »

My Pension comes off before I pay tax, so I believe I pay into an occupation pension.
But my P60 indicates my total before any deductions and after all deductions, but not after pension deduction/before tax and NI.

It may be that this case is more unique and because of the figures on my P60 there has been confusion caused. I will contact HMRC and see if this is the problem.

What?? Either your employer is making serious mistakes in their payroll or you are confused.

You say pension comes off before you pay tax. So the "total taxable to date" should increase between one payslip and the next by whatever you earned (gross) minus your pension conts, right?

For example if you earned £1500 in a month and paid £100 pension conts, then the "total taxable to date" should be £1400 higher than the previous payslip.

Is that right?

Now check the last payslip of the tax year (probably March). The "total taxable to date" should be the same as the figure used on the P60 "total for the year". Is it?

If so then your P60 total is after pension conts have been deducted. So you don't deduct them again. You just declare the P60 income.

If the above isn't the case, you need to talk to your employer as they are giving you the wrong figures.